Question

1. Bayshore Investment Corporation employs a cost of capital rate of 12% for all capital investment and has prepared the following analysis for four projects for the upcoming year:

	Project 1	Project 2	Project 3	Project 4
Initial Investment	$400,000	$596,000	$496,000	$544,000
Net Present Value	($7,596)	$8,552	$28,128	$29,324
Internal Rate of Return	11%	13%	14%	15%

Which project(s) should Bayshore Investment Corporation undertake during the upcoming year

based on a budget of $1,200,000?

(A) Projects 1 and 3

(B) Projects 2 and 3

(C) Projects 3 and 4

(D) Projects 2, 3, and 4

2. Which is the BEST reason for using an activity-based costing system?

(A) To keep better track of overhead costs

(B) To more accurately assign overhead costs to cost pools so that these costs are better   controlled

(C) To better assign overhead costs to products

(D) To assign indirect service overhead costs to direct overhead cost pools

3. Susan Ince is paid 10 per cent of the gross sales of her department as salary per month. Susan received $15,000 each month for the last three months. Which of the following methods BEST describes how Susan is paid?

(A) Commission on sales

(B) Fixed salary

(C) Hourly rate

(D) Piece rate

4. Financial accounting provides a historical perspective, whereas management accounting

(A) emphasizes the future in addition to historical reports

(B) only enables managers to make decisions

(C) emphasizes a current perspective

(D) allows the use of a budget

5. Mary worked 9 hours on Job ABX. Her regular rate is $7 per hour. Job ABX required 7 hours of regular time and 2 hours overtime at the premium of 50 per cent above the regular rate. What is the cost of labour applied to Job ABX?

(A) $56.00

(B) $63.00

(C) $70.00

(D) $94.50

6. A cost management system should provide information to

(A) all functional areas of the organisation

(B) only the accounting area of the organisation

(C) only the production area of the organisation

(D) organisational managers, but not to staff personnel

7. Which of the following situations presents a difficulty for service sector costing?

(A) The relative scarcity of persons familiar with the service sector

(B) The complexity in determining the cost per unit

(C) The unpredictable nature of demand for services

(D) The low fixed cost of maintaining production capacity

8. A manufacturing company operates a system of standard costing as follows:

	Budgeted	Actual
	$	$
Total variable overheads	400,000	340,000
Total fixed overheads	60,000	50,000
Volume of production (Standard machine hours)	10,000	12,000
Units produced	200	200

What is the total variable overhead variance?

(A) 50,000 adverse

(B) 50,000 favourable

(C) 60,000 adverse

(D) 60,000 favourable

Answer 1